Luxon sacks FEC chair Stuart Smith without explanation

The FEC with Stuart Smith in the chair began its inquiry in late October after submissions closed on September 25.

When hearings resumed after the Christmas break, Cameron Brewer was in the chair.

Brewer was not on the FEC previously and so has missed many of the hearings, including those of the chairs and chief executives of the four major banks.

Smith, who is no longer on the FEC, has been in parliament since 2014 while Brewer was first elected in 2023.and sat on Auckland Council for nine years and was chief executive of the Newmarket Business Association between 2005 and 2010. Brewer was also press secretary to former Auckland mayor John Banks

The FEC's terms of reference include examining the state of competition in banking, the barriers preventing competition, the impact of regulation on competition and access to banking, as well as lending to the rural sector and to Maori and Maori organisations and businesses.

According to the New Zealand Herald, Smith's explanation of the change is that prime minister Chris Luxon “wants to give other people a chance to develop.”

The change in chair casts further doubt on whether the government is serious about making changes to banking rules. It came hard on the heels of the Commerce Commission reporting on its study of banking initiated by the previous Labour government.

Finance minister Nicola Willis has said she intends to implement the commission's recommendations, including providing Kiwibank with more capital to allow it to compete more effectively against the big four Australian-owned banks.

However, Willis has also made it clear that a public float of Kiwibank, the most obvious way of providing it with more capital, can't happen until Kiwibank has completed its digital transformation, which is not expected until 2028.

Smith's conduct of the FEC banking enquiry may provide clues as to why he was sacked as chair.

When ANZ Bank New Zealand chair Scott St John and chief executive Antonia Watson appeared before the FEC, Smith made it clear that he didn't accept ANZ's assertions that it isn't making excessive profits.

Smith said: “I know that's your answer,” but that the commission's report had contradicted that assertion. “I don't accept that answer.”

And when the Reserve Bank appeared before the FEC in December, Smith noted that ANZ “has been described as a profitable building society.”

Excluding institutional banking, more than 80% of ANZ's lending is on housing.

Former National prime minister John Key was ANZ chairman until March last year so it's possible Key had a word in Luxon's ear that Smith was too negative about Key's old bank.